Bill S2032-2013

Makes provisions with respect to notices of homeowners deductibles triggers for hurricane windstorms

Provides superintendent of insurance shall establish standards for hurricane windstorm deductibles, creating uniformity in the operation of such deductibles with respect to the triggering event.






TITLE OF BILL: An act to amend the insurance law, in relation to homeowners insurance deductibles triggers

PURPOSE: To help promote better understanding of the applicability and amount of hurricane windstorm deductibles in homeowners and dwelling fire policies. To establish reasonable standards for the operation of hurricane windstorm deductibles.

SUMMARY OF PROVISIONS: This legislation amends section 3445 of the insurance law to require insurers that issue homeowners' and dwelling fire policies with catastrophic windstorm deductibles to provide notice to their policyholders, upon policy issuance and renewal, which clearly explains the amount and the applicability of the deductible, and to send separate notice prior to hurricane season, in accordance with standards established by the superintendent in regulation. The bill would require the superintendent to establish reasonable standards for uniformity in the triggering and operation of hurricane windstorm deductibles to promote clear understanding and a reasonable and actuarially appropriate apportionment of hurricane risk between insurers and policy holders.


Section 3453 of the insurance law requires the superintendent to establish disclosure requirements in regulation with respect to the operation of windstorm deductibles in homeowners' and dwelling fire policies. The regulation sets standards for such notice on the declarations page and in a separate notice accompanying all new and renewed policies.

JUSTIFICATION: Legislation is required to ensure that insurance consumers fully understand the terms of the catastrophic windstorm deductible in their homeowners and dwelling fire policies. In particular, consumers need to understand the increased exposure they are assuming.

Currently, insurers are utilizing a wide variety of windstorm deductible programs in their homeowners and swelling fire policies. Windstorm deductibles, which can range from 1% to 7.5% , are usually expressed as a percentage of the homeowners' Coverage A limit (the value of dwelling structure). A 6% deductible on a 5500,000 would result in the policyholder having to pay the first $30,000 of damages sustained to the home during a windstorm.

While windstorm deductibles are expressed as a percentage, most policy holders are used to relatively low deductibles expressed as a dollar amount (i.e., 5250, 5500, $1,000). Percentage deductibles are generally found in health insurance programs, where policy holders are required to pay a percentage of a medical claim. Therefore, policy holders can easily misconstrue a 6% windstorm deductible as requiring them to pay only 6% of the damages sustained, rather than up to 6% of the value of their home. Additionally, while the deductible is often described in terms of a percentage of the Coverage A limit, it typically applies not only to the losses to the dwelling structure,

but also to additional structures on the premises (Coverage B) and to the contents of the home (Coverage C).

Requiring insurers to issue a notice to policyholders which explains in plain language the amount and circumstances in which the deductible applies will help policyholders better understand these various and complicated deductible provisions. Also, consumer confusion regarding the amount and applicability of their percentage deductibles will be further reduced by requiring the deductible to be expressed, on the policy and declarations page, as a dollar amount of each coverage part to which it applies.

Another area of confusion for consumers is understanding the event which activates or "triggers" the applicability of their windstorm deductible. Currently, insurers' deductible programs contain a variety of 'triggering' events. Since the triggering event will determine whether a windstorm deductible applies to a policy holders loss, it is crucial that it be fair and reasonable to both the policyholder and the insurer.

Uniform standards for and notice explaining the operation of catastrophic windstorm deductibles are necessary to promote easier comparison between different insurers' options, and to ensure clear understanding of the extent of policyholder exposure under these options. The requirements for understandable and fair standards will ensure that catastrophic windstorm deductibles are reasonable, actuarially appropriate and applied in the proper circumstances.

LEGISLATIVE HISTORY: 2011-12 S.3387A; 2008 S.6042


EFFECTIVE DATE: This act shall take effect on the ninetieth day after it shall have become a law, and shall apply to all policies issued or renewed on or after the one hundred eightieth day after the adoption of the regulations required in section 3455 of the insurance law, as amended by this act.


STATE OF NEW YORK ________________________________________________________________________ 2032 2013-2014 Regular Sessions IN SENATE (PREFILED) January 9, 2013 ___________
Introduced by Sens. LAVALLE, MARTINS, MAZIARZ, RANZENHOFER -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance AN ACT to amend the insurance law, in relation to homeowners insurance deductibles triggers THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 3445 of the insurance law, as added by chapter 44 of the laws of 1998, is renumbered section 3455 and amended to read as follows: S 3455. Windstorm insurance notice; DEDUCTIBLE TRIGGER STANDARDS. (A) The superintendent shall by regulation establish disclosure requirements with respect to the operation of any deductible in a homeowner's insur- ance policy or dwelling fire personal lines policy which applies as the result of a windstorm. Such regulations shall prescribe the form of a notice to be provided by an insurer to an insured. The notice shall explain in clear and plain language the amount of the deductible, the circumstances under which the deductible applies and any other matters which the superintendent, in his or her discretion, shall deem necessary or appropriate. (B) THE SUPERINTENDENT SHALL BY REGULATION ESTABLISH STANDARDS FOR HURRICANE WINDSTORM DEDUCTIBLES, WHICH CREATE, TO THE GREATEST EXTENT POSSIBLE, UNIFORMITY IN THE OPERATION OF SUCH DEDUCTIBLES WITH RESPECT TO THE TRIGGERING EVENT. THE SUPERINTENDENT SHALL PROMULGATE SUCH REGULATIONS BY EMERGENCY ADOPTION OR OTHERWISE, WITHIN ONE HUNDRED EIGHTY DAYS OF THE EFFECTIVE DATE OF THE CHAPTER OF THE LAWS OF TWO THOUSAND THIRTEEN WHICH ADDED THIS SUBSECTION. NOTWITHSTANDING PARAGRAPH SEVEN OF SUBSECTION (A) OF SECTION THREE THOUSAND FOUR HUNDRED TWENTY-FIVE OF THIS ARTICLE, ANY CHANGES IN A HOMEOWNER'S INSURANCE POLICY OR DWELLING, FIRE, OR PERSONAL
POLICY REGISTERED AS A RESULT OF THE ADOPTION BY THE SUPERINTENDENT OF REGULATIONS UNDER THIS SECTION, MAY BE APPLIED TO SUCH POLICIES ON THE POLICY'S INITIAL RENEWAL DATE OR THE POLICY'S NEXT ANNUAL RENEWAL AFTER THE EFFECTIVE DATE OF SUCH REGULATIONS. S 2. This act shall take effect on the ninetieth day after it shall have become a law, and shall apply to all policies issued or renewed on or after the one hundred eightieth day after the adoption of the regu- lations required in section 3455 of the insurance law, as amended by this act.


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